1/ My quick take on short selling ban news. Regulators around the world have extensive powers to ban or limit short selling. Korea just banned all short selling for 6 months, and short selling of certain stocks was banned in certain parts of Europe.
2/ During the financial crisis, the SEC banned short selling of certain “financial stocks.” Fun fact: In 2008, many (who were in denial about causes of the crisis) blamed short sellers for loss of confidence in banks.
3/ My base case is that the SEC probably won’t do this again in the absence of more days like yesterday, and if they did so, it would likely be targeted to a subset of the market.
4/ The SEC ban in 2008 after Lehman failed did little to help market confidence and probably hurt it. And this time around, short sellers aren’t the primary scapegoat.
5/ On the other side of the ledger, the WH cares more about stock prices than any other in history, and I wouldn’t be surprised if they tried to pressure the SEC to do so if the market turns south again.
6/ Utilmately, the decision would be in the hands of the SEC commissioners. If the Chair (Clayton) want to do it, and can get 2 other commissioners to vote for it, it would happen. If the Chair doesn’t want it happen or can’t get support from 2 commisioners, it won’t happen.
7/ The SEC’s powers are virtually unlimited here. Congress gave the SEC power to play god on a short term basis if the SEC finds that there is a market emergency.
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